Shipbuilding stocks rally over hope for 'super cycle'

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 08:07

Markets

Shipbuilding stocks rally over hope for 'super cycle'

Posted : 2023-06-04 16:41

Updated : 2023-06-05 14:09

A shipyard of Daewoo Shipbuilding & Marine Engineering (DSME), a major shipbuilder in Korea, on Geoje Island in South Gyeongsang Province / Korea Times file

By Yi Whan-woo

Shipbuilding stocks are rallying on the back of anticipation for a "super cycle" ― a period of demand-driven expansion that many market observers say takes place every 30 years in the industry.

HD Korea Shipbuilding Offshore Engineering, one of the country's three main shipbuilders, increased 1.86 percent to close at 98,880 won ($75.48) on the benchmark KOSPI, Friday, on the back of higher Baltic Dry Index (BDI) levels.

The BDI is a measurement of commodity shipping costs and the outlook for the bulk-carrier business around the globe.

Global giant, HD Korea Shipbuilding & Offshore Engineering, began to bounce back in April and advanced 13.44 percent in May.

Two other industry leaders ― Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) ― are also performing well on the KOSPI.

Samsung Heavy Industries added 2.15 percent to close at 6,180 won, Friday, and DSME, which was recently acquired by Hanwha Group, rose by 0.69 percent to 117,400 won on the same day.

For the entirety of May, Samsung Heavy Industries added 7.75 percent while DSME gained 5.93 percent.

"The upward trajectory in shipbuilding stocks is attributed to hope for a 'super cycle," said Hi Investment and Securities analyst Byun Yong-jin, noting that such cycles may come 10 years early after taking place in 1973 and 2003.

In particular, he viewed that the demand for LNG carriers may surge and that the Korean companies as a whole are expected to receive orders of up to 57 carriers annually in the coming years.

Hana Financial Investment analyst Yoo Jae-sun speculated that the demand for large ships "will increase faster in 2024 and 2025."

SK Securities voiced a similar view, saying that 37.7 percent of the total number of carriers worldwide have operated for 15 years or longer and need to be replaced.

It also said many shipping companies are considering new, environmentally-friendly vessels in line with tougher regulations imposed by the International Maritime Organization (IMO).

yistory@koreatimes.co.kr